They are calling it recession chic: a trend for low-cost dressing that is leading even the world's top fashion designers to reveal their outfits, not on the catwalks of Paris, Milan and London, but in the windows of the high street.

Designers have collaborated with chain stores before, but demand for the cut-price designer lines has hit an unprecedented level with retailers saying some items are selling out before they even go on display. As the luxury market struggles - the Prada Group has reported a drop in earnings of 22% this year - more designers are looking to cash in on the discount boom.

Crowds swamped Topshop when the Biba designer Barbara Hulanicki's collection was revealed, and a one-sleeved, leopard-print dress by Julien McDonald for Debenhams sold out online before reaching the store. Deputy chief executive Michael Sharp said they put the success of their designer range down to recession chic: "Many shoppers are turning to designer equivalents that deliver quality, durability and design, but with a chic-economic price tag."

It is the way these collections are developing that shows the collaborations are a key strategy for both luxury designers and high-street retailers in difficult times. Matthew Williamson's limited edition collection for retail giant H&M sold out the day it hit British stores last month. Unusually, a second wave of his designs will be stocked in 1,600 of H&M's stores worldwide from 14 May, and Williamson is also turning his hand to menswear. His collection will be in store for longer than any previous H&M designer collaboration.

"This is an exceptional project for H&M," said spokeswoman Laura Maggs. "The brilliant colours and patterned fabrics in Matthew's collection will cheer up anyone suffering from the recession's gloom."

Similarly, Japanese chainstore Uniqlo not only has one-off collections with trendy US designers Shipley & Halmos and Gilded Age due in store, but renowned designer Jil Sander is now a permanent part of the team. Her clothes will be available from next season. "By partnering with designers, and in particular such a respected designer as Jil Sander, we're giving customers a new reason to come in the store," said Amy Howarth, Uniqlo spokeswoman. "The choice of designers we work with ensures we appeal to customers looking to scale down their spending from designer to high street, as well as appealing to those aspiring to a designer wardrobe."

Harriet Quick, fashion features director of British Vogue, which has just relaunched its "More Dash than Cash" feature to inspire women dressing on a budget, thinks the appeal isn't just about the designer badge. "People have gone past buying something just because it's got a designer label on it. We're way more conscious of spending money and the high street is offering far more now. Releasing the Matthew Williamson H&M collection in stages is clever, the Topshop designer collections are going strong and Jil Sander is a genius match-up for Uniqlo.

"The defining feature of recession chic will be lateral thinking. It's not just about going to Primark, it's looking for generic items in John Lewis or going to army surplus stores, rethinking your wardrobe with clever tricks. When we look back on the style of these times we're going to see ingenuity."

Mary Hall, an American journalist who has started her own blog, The Recessionista, about the new pursuit of fashionable bargains, said: "In the economic downturn, it's important for consumers to look for chic and cheap deals in unusual places. The message to consumers is clear: recession chic is possible. Just take the time to compare prices and make good choices and you can still treat yourself well."

Beating the crunch

Fashion products flourishing in the downturn:

SelfridgesSales of false eyelashes are up 30%. Demand is such that it is setting up a lash bar in the London store this month. Watch sales are also up 30%: Toywatch is one of the highest performers.

John Lewis Accessories are doing great business - branded handbags are selling extremely well, with Osprey and Lulu Guinness bags up 58% and 42% respectively. Gucci sunglasses sales were up 19% on last year.

ASOSTop sellers for the first three months of 2009 include bow design (£29.50) and jazz-print dresses (£37.50), with 12,000 sold in all. Shoes are also doing well.

SuperdrugSales of hair dye are up 17%, as are manicure and pedicure tools. Nail polish remover sales have risen 13% compared with 2008.

Harvey NicholsFragrance sales are very strong, particularly older heritage brands such as Baghari and Creed, as customers prioritise quality over quantity.